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As reported by us that Govt is planning a new disclosure scheme to regularise the cash deposited in view of demonetisation of Rs 500 -1000 notes. On similar lines Government has proposed new amendment bill THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 under which undisclosed income can be offered for Tax @ 50 % (including penalty & surcharge) .Further 25% of undisclosed income has to be deposited in Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 for 4 years without interest.

If scheme is not opted then Tax shall be imposed on unexplained deposit @ 60 % plus 25 % cess on tax plus 10% of Income tax including surcharge as penalty means overall 75+7.5=82.5%

STATEMENT OF OBJECTS AND REASONS
1.Evasion of taxes deprives the nation of critical resources which could enable the
Government to undertake anti-poverty and development programmes. It also puts a
disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes
to make up for the revenue leakage. As a step forward to curb black money, bank notes of
existing series of denomination of the value of five hundred rupees and one thousand rupees
(hereinafter referred to as specified bank notes) issued by the Reserve Bank of India have
been ceased to be legal tender with effect from the 9th November, 2016.

2. Concerns have been raised that some of the existing provisions of the Income-tax
Act, 1961 could possibly be used for concealing black money. It is, therefore, important that
the Government amends the Act to plug these loopholes as early as possible so as to prevent
misuse of the provisions. The Taxation Laws (Second Amendment) Bill, 2016, proposes to
make some changes in the Act to ensure that defaulting assessees are subjected to tax at a
higher rate and stringent penalty provision.

3. In the wake of declaring specified bank notes as not legal tender, there have been
representations and suggestions from experts that instead of allowing people to find illegal
ways of converting their black money into black again, the Government should give them an
opportunity to pay taxes with heavy penalty and allow them to come clean so that not only
the Government gets additional revenue for undertaking activities for the welfare of the
poor but also the remaining part of the declared income legitimately comes into the formal
economy. Thus, money coming from additional revenue as a result of the decision to ban
Rs. 1000 and Rs. 500 notes can be utilised for welfare schemes for the poor.

4. Therefore, an alternative scheme namely, the ‘Taxation and Investment Regime for
Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY) is proposed to be provided in the
Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed
income and penalty @ 10% of the undisclosed income. Further, a surcharge to be called
'Pradhan Mantri Garib Kalyan Cess' @ 33% of taxis also proposed to be levied. In addition
to tax surcharge and penalty, the declarant shall have to deposit 25% of undisclosed income
in a Deposit Scheme to be notified by the Central Government in consultation with the
Reserve Bank of India under the 'Pradhan Mantri Garib Kalyan Deposit Scheme, 2016'.
This amount is proposed to be utilised for the programmes of irrigation, housing, toilets,
infrastructure, primary education, primary health, livelihood, etc.; so that there is justice and
equality.

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Brief description (PMGKY) is as under.

Tax @ 30 % of Income disclosed under this scheme .

10% penalty of Amount declared.

Surcharge @ 33% of Tax due means (33% X 30%)10%

Further 25% of undisclosed Income shall have to be deposited under Pradhan Mantri Garib Kalyan Deposit scheme for 4 years without Interest.

So total 30+10+9..90 =49.90(approx 50%) is payable.

No deduction in respect of any expenditure or allowance or set-off of any
loss shall be allowed against the income declaration under this scheme.

The tax and surcharge and penalty payable
under scheme in respect of the undisclosed income, shall be paid before filing of
declaration

Any amount of tax and surcharge or penalty
paid under shall not be refundable.

If undisclosed Income has not been offered under the scheme then tax @ 60 % plus surcharge 25% of tax (means 15 % of Income ) plus penalty @10% of Income tax including surcharge i.e 10% of 75% =7.5% so total is 82.5%)

The scheme start and end date shall be notified separately

Overview of Amendments Proposed

PARTICULARS

EXISTING PROVISIONS

PROPOSED PROVISIONS

General provision for penalty

PENALTY (Section 270A)

Under-reporting - @50% of tax

Misreporting - @200% of tax

(Under-reporting/ Misreporting income is normally difference between returned income and assessed income)

No changes proposed

Provisions for taxation & penalty of unexplained credit, investment, cash and other assets

TAX (Section 115BBE)

Flat rate of tax @30% + surcharge + cess

(No expense, deductions, set-off is allowed)

TAX (Section 115BBE)

Flat rate of tax @60% + surcharge @25% of tax (i.e. 15% of such income). So total incidence of tax is 75% approx.

(No expense, deductions, set-off is allowed)

PENALTY (Section 271AAC)

If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax (including surcharge) of 75%.